How to Prevent Online Payment Fraud
EMV and EMV Liability Shift
An important factor in preventing online payment fraud is EMV, standing for Europay Mastercard Visa. EMV represents a set of global standards based on chip card technology. Chip card technology revolutionized the payments industry and allowed for the secure processing of electronic payments. It has single-handedly given businesses the upper hand in protecting their bottom line and their customers from fraud. This is because magnetic swipe technology can be easily compromised by hackers. Chip technology is much more difficult to hack, making a safer and more secure environment for both businesses and customers.
EMV liability shift refers to the transfer of responsibility for financial losses due to the fraudulent use of credit cards. Because fraudsters could easily copy magnetic swipe cards, card companies were responsible for the losses incurred due to fraud.
To fight fraud effectively, card companies united globally to create EMV technology, rolling out chip cards in 2015. They’ve been proven to reduce in-store counterfeit fraud wherever chip card technology has been implemented. Many businesses don’t understand that when chip cards were implemented, the responsibility for financial losses transferred from card companies to businesses.
The EMV liability shift reduced the costs of counterfeit fraud and made payments safer for everyone. Not all businesses have upgraded to EMV-ready terminals and fraudsters knowingly target these businesses. If you haven’t upgraded your terminal, your business is vulnerable every time a chip card is swiped instead of inserted.
Online Payment Fraud Prevention
Online payment fraud can often begin as a slow leak, and then boom— fraudulent transactions pour in, and businesses suffer. Ecommerce retailers get an average of 206,000 web attacks monthly and 47% said they’ve experienced fraud in the past 2 years. Thankfully, there are tools and technologies in place to help merchants fight against this.
Fraud management relies on both technology and human intelligence. The goal of the process is two-fold: enable fraud prevention while promoting sales, both requiring a delicate balancing act. This is because fraud detection tools rely on machine learning-based AI algorithms to determine transaction legitimacy. If not properly taught, calibrated, and monitored, false positives reject too many sales. Merchants in turn lose revenue due to suspected fraud and may lose new customers.
Some online payment fraud prevention tools include two-factor authentication, card verification value (CVV) verification and device fingerprinting. These tools can be used together to create a layered approach to online payment fraud prevention.
To prevent credit card fraud, it’s important to monitor your account regularly, use secure websites, and avoid sharing personal information. Other measures include setting up alerts for suspicious activity and avoiding public Wi-Fi when making transactions. By being vigilant and taking proactive steps, you can help protect yourself from fraud and minimize the risk of losses.
Online Credit Card Fraud Prevention Tips
Merchants need to start thinking about online payment fraud prevention measures. Here are a few different ways on how to prevent credit card fraud:
- Mastercard SecureCode and Verified by Visa: These 3D Secure protocols ensure the person attempting the purchase is the owner of the card prior to authorization. These tools cut down on fraudulent transactions and boost consumer confidence knowing their information is being verified and protected.
- Address Verification Service (AVS): This is another tool that validates whether the person using the card is the cardholder or not. At the time of purchase, AVS validates the billing address given with the one on file during authorization. If the authorization is approved and the AVS response indicates a match, the merchant can proceed with the transaction.
- Card Verification Value 2 (CVV2): This protocol requires the purchaser to enter the three-digit security number printed on the back of their credit card. This verifies that the customer making the purchase is in possession of the actual payment card.
- Tokenization: Payment tokenization eliminates the need for merchants to handle or store payment data. Instead, sensitive payment data is replaced with a unique identifier called a “token”. The actual payment data is then stored in a third-party data center.
- Chargeback Alerts: Some third-party solution providers offer chargeback notifications that alert a merchant when a dispute is filed. This typically happens when it’s filed with an issuing bank in the solution provider’s network. This gives the merchant an opportunity to handle the dispute directly with the customer rather than after the process has started. Since chargebacks result in fines and penalties for merchants, it’s optimal to address disputes before they turn into chargebacks.
- Device Fingerprinting: A device fingerprint is a pattern of online behavior that’s identified and attached to a particular device. It can be used to identify devices that have previously been known to commit online fraud or identity theft. Using this tool makes it easy to block purchases and transactions from those devices.
- IP Geolocation: IP geolocation can be used to identify anomalies in CNP transactions that may signal fraud. For example, if an address associated with Chicago is entered, but the IP address is in Brazil, this would signal fraud. Depending on the tool, it may block the transaction altogether or route to a manual review team for further research.
- Behavioral Modeling/Profiling: Some third-party payment solution providers have created algorithms based on machine learning technology that enables behavioral modeling and profiling. This rules engine can identify and detect potential fraud based on anomalies to establish behavioral patterns associated with payment card data. When “out-of-the-ordinary” patterns or behaviors are identified, the engine alerts the merchant of the inconsistency. From there, merchants can decline the order or submit for manual review and further authentication.
- Big Data: Merchants can tap into multiple data sources in real-time to identify inconsistent or anomalous transaction behavior. Some tools gather social data to detect inconsistencies in location or other identifying information. Other solution providers offer access to negative information databases and behavioral databases. These allow merchants to sniff out suspicious orders and route them for additional verification or review.
Preventing online payment fraud requires a combination of awareness, vigilance, and practical measures. As online transactions continue to become more prevalent, it’s crucial to take the necessary steps to safeguard your financial information. By following the tips outlined, you can significantly reduce the risk of falling victim to online payment fraud. Prevention is always better than cure, and investing in your online security is a small price to pay for financial security.
How can PAYARC help with online payment fraud prevention?
PAYARC uses advanced fraud detection tools, encryption, multi-factor authentication, and tokenization to prevent online payment fraud. These measures ensure that transactions are monitored, sensitive data is protected, and an additional layer of security is added to online transactions. These features help businesses and consumers feel confident in their transactions and minimize the risk of falling victim to fraud.
Contact us today and start protecting your online payments!